Secondhand Under Scrutiny: Luxury House Pushback Against the Resale Market

With the rise of the resale economy, secondhand shopping has become a mainstream way to purchase luxury items. As a result, the secondary market is growing three times the rate of the primary market, driven in part by the popularity of online luxury resale platforms such as ThredUp, the RealReal, and Depop.¹ However, while the increased availability of secondhand fashion presents clear benefits for consumers, luxury houses––brands such as Gucci or Dior that design and sell high-end fashion––remain concerned about quality control, authentication inaccuracies, and the loss of control over the use of their trademarks.² This diminished control has prompted luxury houses to commence a number of lawsuits that have required courts to consider what duty the resale platforms have to prevent infringement, leading both resellers and brands alike to consider new approaches to the evolving resale market.³ One such example involved Chanel’s attempt to police counterfeit goods in the resale market––a topic previously explored in the Brooklyn Sports and Entertainment Law Blog’s 2024 coverage of Chanel, Inc. v. What Goes Around Comes Around, LLC.⁴

Defining Liability for Resale Platforms

Although the resale market is booming more now than ever, trademark concerns in the secondary market are not new. In 2010, Tiffany & Co. (“Tiffany”) brought numerous claims against eBay, including contributory trademark infringement: a form of derivative liability where a party is held responsible for another party’s direct and wrongful trademark infringement.⁵ Tiffany alleged that eBay “knew or had reason to know” about the widespread sale of counterfeit Tiffany items on its platform.⁶ In evaluating Tiffany’s claim, the court emphasized that eBay had only generalized notice that some Tiffany goods on its site may be counterfeit and had promptly removed all counterfeit listings it found.⁷ Accordingly, the court found that eBay’s knowledge of counterfeit sales was insufficient to prove liability for contributory trademark infringement.⁸

By declining to find eBay liable, the court established that contributory infringement for online marketplaces requires specific knowledge of infringement rather than a generalized awareness of risk.⁹ The Tiffany ruling, while arising from a less conventional second market, set a precedent that continues to shape how luxury brands and resellers alike must adapt to the evolving resale landscape.¹⁰

Reasserting Brand Control Through Litigation

As the secondhand market has expanded, disputes over authentication and trademark control have intensified, prompting luxury houses to pursue more aggressive litigation strategies.¹¹ A notable example is Chanel’s 2020 lawsuit against multi-brand resale platform The RealReal, in which Chanel successfully alleged trademark infringement under the Lanham Act.¹²

There, Chanel had conducted an investigation on The RealReal, finding at least seven counterfeit Chanel handbags, as well as two customer reviews alleging that The RealReal had sold them counterfeit Chanel handbags.¹³ In response, Chanel sued for direct trademark infringement (as opposed to a contributory claim, as in Tiffany)¹⁴ due The Real Real’s “sole discretion” over the sale of these luxury items;¹⁵ the court emphasized the violation’s significance in light of The RealReal’s advertised “rigorous authentication process.”¹⁶

Though The RealReal sought to avoid liability by invoking the standard set out in Tiffany, the court found this analogy unpersuasive.¹⁷ The court noted that the Tiffany decision centers on a third-party’s liability for its vendors, but no such dynamic exists here.¹⁸ Unlike eBay, which primarily operates as a platform that connects third-party sellers and buyers, The RealReal’s business model plays a more active role in the resale process by granting it substantial control over authentication, marketing, and pricing over sale of goods.¹⁹ The RealReal even identifies itself as “the only resale company in the world that authenticates every single item sold.”²⁰

The distinction between these two business models has significant legal implications. Since The RealReal has direct involvement in the resale process, courts are more willing to treat it as a direct seller rather than an active marketplace.²¹ The court recognized the benefit conferred on The RealReal, insofar as it has active control over the secondary market for these trademarked luxury goods– setting the conditions for how customers can purchase those products.²² Because The RealReal “reaps substantial benefit” from controlling and curating the market itself, the Court held that it must bear a higher burden to prevent infringement.²³

In the aftermath of such litigation, prominent resale platforms must recognize that the courts will hold them to a higher standard of trademark compliance than that of passive third-party e-commerce platforms, like eBay.²⁴ In another 2022 suit against second-hand luxury retailer What Goes Around Comes Around (“WGACA”), Chanel made similarly successful claims of trademark infringement.²⁵ There, the court held WGACA liable on the basis that it had marketed and sold counterfeit items, finding it “willfully blind” of such infringement issues.²⁶ In both cases, the 2nd Circuit and the Southern District of New York seem more inclined to perceive these sellers as consciously overlooking counterfeit issues, rather than simply being unaware of them, and imposed liability on sellers accordingly.

Embracing Resale Through Collaboration

However, litigation is not the only method of addressing resale-related concerns. Many luxury houses have incorporated certified pre-owned programs, delving into the secondhand market themselves.²⁷ In March 2023, Gucci launched a partnership with French resale company Vestiaire Collective as part of a broader circular luxury initiative.²⁸ Through this collaboration, Gucci maintains control over resale by allowing customers to trade in certain “pre-loved” items for store credit.²⁹ As part of the program, customers must bring their bags into participating Gucci stores to be evaluated and valued, or submit such requests online.³⁰ Likewise, Balenciaga, Valentino, Jean Paul Gaultier, and Oscar de la Renta, have all made efforts to incorporate similar resale efforts through their own platforms or collaborations with other resale platforms.³¹ A collaborative approach therefore appears to be a forward-looking way for luxury houses to address their resale fears while also creating an avenue to gain new customers, appeal to a younger audience, and cater to sustainability concerns.³²

The Future of Luxury Resale

Looking forward, litigation in the luxury resale space, alongside brands’ strategic moves to incorporate resale into their own business models, reflects the core concern of luxury houses: a loss of control over how their brands are presented and how their image endures.³³ In the wake of these Chanel lawsuits over authentication concerns, second-hand platforms that prioritize control over the resale process should take measures to increase funding for authentication to meet a higher burden of preventing infringement.³⁴ While litigation remains an available tool, pre-owned programs enable luxury brands to maintain tighter control over their products, while providing secondhand options for buyers.³⁵ Joining the resale wave enables luxury brands to gain a new customer base and show concern about circularity and sustainability.³⁶ In the words of Alexander Bolen, CEO of Oscar de la Renta, “We decided that if we’re going to do [resale] right, we ought to do it ourselves.”³⁷